The energy sector in India is one of the main drivers of the economy. The pandemic has had an impact on the market as well as the energy sector. The space is being watched keenly as it has significant growth potential, with efforts being made to meet the demand of a growing population and increasing urbanisation as well as industrialisation. India’s energy sector will also have a huge influence on global trends, including the prospects of a successful response to climate change concerns. There are, however, critical questions about how demand growth will be met. Conventional operating models pose many challenges like impact on the environment, by-product utilisation and variable cost optimisation.
With a growing economy and with most of the population either in the middle-income group or below, affordable and clean energy is a necessity and that, too, on a priority. Conventional methods of energy generation using fossil fuels have not proved to be very cost-effective and also have an adverse impact on climate and the environment. Therefore, efforts are on to reduce the cost of renewable energy equipment and technologies. The process is underway and is on the course to low emission.
RELATED STORIES Gaurav Garg Gaurav Garg HEAD – RESEARCH & HCM|CAPITALVIA GLOBAL RESEARCH LIMITED- INVESTMENT ADVISOR ‘Nifty FMCG steadily growing; medium to long term investors can hold positions till 36,650-37,000’ Lockdown to hit demand for autos; here’s what investors can do Here is why long-term investors can buy energy stocks on correction The recent trends in the power sector indicate that thermal power will mostly be contained to super-critical technology as it has lower fuel consumption. This sector has been on a rising trend on phenomenal terms post lockdown 1.0 and there have been good value buying opportunities.
In our view, this sector is expected to be one of the most happening in the country for the foreseeable period as the drive will not be just from the government but the socio-economic impact will be such that there will not only be the demand for affordable but also clean energy.
Electric vehicles expected to enter the market in a big way in the upcoming decade is a major issue that will severely impact oil imports, however, the government’s clean-cooking drive, the supply of gas is expected to remain less hampered. However, the present scenario is not rosy for this space, at least in short term. Crude oil price moved above $70 mark, India meets 80 percent of its needs through imported crude and the major part of the payment is in dollars.
In the international market, the dollar index is also on the rise, one of the reasons the Indian rupee is depreciated against the American currency. If this continues, we can see a rise in crude and dollar price, which will widen the fiscal gap and also increase inflation due to the increased cost of logistics. Nifty Energy is expected to take a healthy correction in the next two or three months and the index may slip to 18,000 before bouncing back.
Therefore, we advise investors not to make any long positions as of now and wait for the correction to buy on dips. Investors with a short-term view may book profits at this point and those with long-term view can hold their positions. Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.